can rising transaction numbers steady prices?

Soaring property prices have largely been down to lack of supply, combined with pent-up demand. Buyers, encouraged by the experience of living through lockdowns and now adapting to hybrid working patterns, have been on the hunt for bigger properties with more space both inside and out.

Meanwhile, stock has not kept up with demand, with older homeowners, in particular, not tempted to downsize to smaller homes to free up larger family properties. It stands to reason that if there are more buyers than properties, prices will rise. This situation has also been helped along by cheap mortgage rates and bigger deposits saved up during the pandemic, when people were restricted from spending as much as usual on holidays and going out.

Transactions on the rise

With HM Revenue & Customs reporting higher transactional volumes in March compared with February, could this be the turning point when the market finally gets some stability and pricing normalises? HMRC reported that the seasonally-adjusted number of residential transactions in March was 114,650, some 2.6 per cent higher than in February. With spring and summer upon us, traditionally busy times of year for the housing market, could sellers finally be persuaded to put their homes on the market to take advantage of what could potentially be a peak in pricing?

While on the rise, transactional volumes are much lower than they were in March 2021 – some 35.7 per cent lower on a seasonally-adjusted basis – hence such a significant increase in property values over the past year. The difference last year was that the stamp duty holiday encouraged many would-be sellers to get on and sell, bringing forward moves that they might have made over the following months or years. This underlines what we have been saying for some time – that a revamp of stamp duty is needed to stimulate activity in the market, increasing supply and stabilising house prices.

Asking prices continue to rise

With Rightmove’s latest house price survey suggesting that asking prices have reached a record high, rising almost 10 per cent in the last year alone, a stabilising of pricing is not happening just yet. Rightmove says April was the third consecutive month where asking prices hit an all-time high, with the bulk of the increase occurring in the last three months, with prices rising by more than £19,000.

What makes this all the more surprising is that it comes at a time when the cost-of-living crisis is escalating, putting intense pressure on household budgets. Despite rising inflation and interest rates as well as ongoing economic uncertainty, it is the lack of properties coming onto the market which is creating huge competition among buyers and driving prices ever higher.

While the chance of further interest rate rises is extremely high, buyers are taking advantage of low rates and fixing for as long as possible in order to manage their mortgage payments over the next few years.

Non-sustainable price hikes

While homeowners may welcome a rise in property prices, it is not helpful for first-time buyers or hard-pressed second steppers trying to move up the ladder. While the latter group may get more money for the property they are selling, they will have to pay even more for their next home if they are moving up the ladder, meaning the trading gap is growing ever wider. Buyers are having to find more money to purchase their dream home, just at a time when rising bills and interest rates are making everything more expensive.

First-time buyers are facing rising rents as well as having to find a bigger deposit. Those who don’t have assistance from the Bank of Mum and Dad are having to put off buying a home for much longer than they might have wished.

Some reform to stamp duty, perhaps removing the need for downsizers to pay it, should be considered in order to stimulate the market and increase supply, which will help keep prices in check.

Non-residential taking time to recover

HMRC also reported on on-residential transactions, which are still trailing behind their residential counterparts. This is due mainly to tax changes introduced by the government to steady the ship with regard to investors, which in turn is pushing up rents.

With the retail sector impacted by the rise in online sales, changes to and reform of business rates are also needed to encourage retailers to return to our high streets.

How MT Finance can help

We specialise in arranging short-term finance quickly. So, if you are buying an investment property but are waiting on the sale of another property or want to put yourself in the strongest possible position in a market weighted against the buyer, then a bridging loan may be the answer. Alternatively, if you want to release equity to purchase an investment property or expand your business, a second charge bridging loan may be useful.

We can release funds quickly and take a practical approach to each application. If you’d like any information regarding our short-term funding options, please get in touch online, via email or on 0203 051 2331.

quick enquiry